Overview
Title
To amend the Internal Revenue Code of 1986 to impose a tax on the net value of assets of a taxpayer, and for other purposes.
ELI5 AI
The bill wants to make super-rich people, who have more than $50 million, pay extra money to the government to help share the wealth more evenly, and it plans to give lots of money to the tax office to make sure they check if everyone is paying correctly. This is like asking those with lots of toys to share a bit more and giving helpers extra tools to count all the toys.
Summary AI
The bill, titled the "Ultra-Millionaire Tax Act of 2024," aims to amend the Internal Revenue Code to impose a wealth tax on individuals with net assets exceeding $50 million. The tax rate starts at 2% for assets over this threshold and increases to 3% or 6% if certain health legislation passes. It includes detailed rules for calculating the tax on various types of wealth, reporting requirements, and provisions for enforcement, including audits. Additionally, the bill authorizes significant funding for the Internal Revenue Service to enforce these new tax measures from fiscal years 2024 through 2034.
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AnalysisAI
The proposed bill, titled the "Ultra-Millionaire Tax Act of 2024," seeks to amend the Internal Revenue Code of 1986 to introduce a new wealth tax imposed on the net value of assets held by individuals and certain trusts. A key feature of this legislation is the establishment of a tax on individuals with assets exceeding $50 million, with graduated tax rates that increase for assets surpassing $1 billion. The bill includes complex mechanisms for assessing and reporting these assets, with provisions for penalties on valuation misstatements and specific rules for married individuals, trusts, and individuals who pass away within a calendar year.
Summary of Significant Issues
One of the core issues with this bill is the complexity of its provisions, particularly concerning the computation and reporting of the wealth tax. These sections include intricate rules for valuation of assets, treatment of different kinds of trusts, and conditions under which tax rates may change in response to healthcare legislation. This complexity can lead to confusion and potential misinterpretation among those affected, particularly given the detailed accounting required for different kinds of assets and trusts.
A notable controversy arises from the requirement that the Internal Revenue Service (IRS) audit at least 30% of taxpayers subject to this new wealth tax each year. Such a mandate could substantially increase the IRS's workload, raising questions about resources and the fairness of audit selections.
Additionally, the substantial allocation of $100 billion to the IRS over a decade, primarily for enforcement, prompts concerns regarding potential wasteful spending. Lacking detailed oversight mechanisms and efficiency metrics, this appropriation leaves room for questions about financial accountability and effectiveness.
Broad Public Impact
The introduction of a wealth tax primarily impacts the ultra-wealthy, aiming to increase tax revenue from those holding significant wealth. It may contribute to reducing economic inequality by redistributing financial burdens to those with greater assets. However, high-net-worth individuals might employ various strategies to minimize tax liabilities, possibly leading to increased use of offshoring and other tax avoidance schemes.
The broader public might see indirect effects in the form of enhanced public services if tax revenues are efficiently used for public projects. On the other hand, compliance costs and administrative burdens could lead to disputes and litigations, potentially affecting taxpayer morale and perceptions of fairness within the tax system.
Impact on Specific Stakeholders
Positive Outcomes:
Middle and Lower-Income Families: These groups might benefit from additional resources allocated to public services derived from increased tax revenues from the wealthy.
Policy Advocates for Economic Equality: The bill represents a step towards addressing wealth inequality, aligning with goals to shift more tax burdens to those most capable of bearing them.
Negative Outcomes:
Ultra-Wealthy Individuals and Families: These stakeholders face direct financial impacts from higher taxes and potential increased scrutiny from IRS audits, which could pressure estate planning and asset management strategies.
Trust Administrators: Complex rules for different trust types create an administrative burden, requiring a cautious approach to ensure compliance and avoid penalties.
IRS and Tax Professionals: With increased audit requirements and expanded responsibilities, there may be strains on resources, requiring additional training and potentially lengthening processing times for tax filings and disputes.
In conclusion, while the "Ultra-Millionaire Tax Act of 2024" intends to create a more equitable tax system by targeting wealth distribution, its complexity, potential administrative burdens, and large financial allocations demand careful consideration to ensure transparency, efficiency, and fair implementation. As this bill advances through the legislative process, assessing these elements will be essential to align its execution with its intended goals.
Financial Assessment
The "Ultra-Millionaire Tax Act of 2024" introduces significant financial measures, primarily through the imposition of a wealth tax and substantial appropriations to the Internal Revenue Service (IRS). These financial elements are intricately tied to various issues identified within the bill.
Wealth Tax Imposition
The bill mandates a 2% tax on individuals with net assets exceeding $50 million, and this rate increases to 3% or further to 6% under certain conditions related to health care legislation. On the financial front, these figures aim to target the ultra-wealthy segment, motivating discussions about economic equality and redistribution.
The wealth tax provision itself is a focal point for controversy, as highlighted in the issues section. The complexity and reach of this tax could have widespread implications not just for ultra-wealthy individuals but also for the broader economic landscape. This complexity might complicate compliance and provoke debates about its fairness and efficacy.
IRS Appropriations
A significant portion of the bill involves financial allocations towards the IRS. Over a period from fiscal years 2024 through 2034, $100 billion is authorized for the IRS with specific allocations: $70 billion for enforcement, $10 billion for taxpayer services, and $20 billion for business system modernization.
These appropriations have sparked concerns regarding the potential for wasteful spending. The concern arises from the substantial size of these funds allocated to the IRS and the lack of clear oversight and efficiency metrics. This brings into question the accountability of how taxpayer dollars are being utilized and whether this enforcement funding will be effective in achieving the intended outcomes without unnecessary expenditure.
Enforcement Mandates
Furthermore, a noteworthy element is the mandate for the IRS to audit at least 30% of affected taxpayers annually. This requirement could impose a sizable strain on IRS resources, leading to discussions about whether such a mandate is practical. This also raises questions about the selection process for audits, fairness, and the potential for increased government oversight to impact individuals’ financial privacy.
Health Care Legislation Link
The bill notably links the applicable percentage of the wealth tax to health care legislation, meaning that if certain health policies are enacted, the tax rate could increase. This financially driven approach could be seen as an attempt to influence health policy changes through fiscal means, provoking ethical and political debates on the appropriate boundaries of tax laws.
In conclusion, the financial aspects of the "Ultra-Millionaire Tax Act of 2024" touch upon key points of contention around wealth distribution, economic policy, and government resource allocation. As these financial measures are debated, they will likely continue to fuel discussions on fairness, accountability, and the role of legislation in shaping financial and social policy in the United States.
Issues
The imposition of a wealth tax on taxpayers and trusts in Section 2 raises significant controversy due to its complexity and potential to affect a large segment of the population, especially ultra-wealthy individuals and families. This tax could be seen as politically charged and financially impactful, influencing wealth distribution and economic policies.
The enforcement provision in Section 2905 mandating the IRS to audit at least 30% of taxpayers subject to the wealth tax annually may be seen as a substantial administrative burden, straining IRS resources. This requirement could raise concerns about resource allocation, fair audit selection, and efficiency, prompting debates on government spending and oversight.
The appropriations of $100 billion for the IRS over a ten-year period in Section 4, with $70 billion specifically for enforcement, could lead to concerns about potential wasteful spending. The lack of detailed oversight mechanisms and efficiency metrics raises questions about financial accountability and the effective use of taxpayer dollars.
The provision in Section 2901 that ties the applicable wealth tax percentage to health care legislation might blur legislative lines by indirectly pressuring healthcare changes through tax policy, raising ethical and political concerns about the scope of tax laws.
The treatment and valuation of assets as described in Sections 2902 and 2903 is particularly complex, involving retrospective and prospective methods, which could lead to legal disputes and confusion among taxpayers. Clarity and simplification may be needed to avoid these issues.
Section 2904 grants extensive discretion to the Secretary in defining reporting requirements, which could result in inconsistent application and increase risks of noncompliance. This vague responsibility may lead to varied interpretations and questionable legal enforceability.
The exclusion of certain trusts, such as charitable trusts, from the wealth tax in Section 2901(e)(3)(B) might prompt questions regarding fairness, creating potential loopholes for asset protection and strategic tax avoidance.
The language around substantial and gross wealth tax valuation misstatements in Section 6662 introduces rigorous penalties that necessitate clear understanding to avoid unintended tax penalties, potentially leading to legal challenges.
The significant interest term in Section 3 regarding the strengthening of disclosure requirements is ambiguous, potentially leading to broad interpretations and inconsistent enforcement, thus raising legal and ethical questions about privacy and tax avoidance.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the bill states that this legislation can be called the “Ultra-Millionaire Tax Act of 2024.”
2. Imposition of wealth tax Read Opens in new tab
Summary AI
The text introduces a proposed wealth tax in the United States, which would apply to individuals with taxable assets over $50 million. The tax rate starts at 2% for assets exceeding $50 million and is higher for assets over $1 billion, with additional rules for married people, certain trusts, and other special cases.
Money References
- “(2) ZERO BRACKET THRESHOLD; TOP BRACKET THRESHOLD.—For purposes of this section— “(A) ZERO BRACKET THRESHOLD.—The zero bracket threshold is $50,000,000.
- “(B) TOP BRACKET THRESHOLD.—The top bracket threshold is $1,000,000,000.
- “(2) COMPUTATION OF TAX.— “(A) IN GENERAL.—In applying this chapter to a nongrantor multibeneficiary trust— “(i) the zero bracket threshold shall be equal to the sum of— “(I) $0, plus “(II) the lowest unused 0 percent bracket amount assigned to the trust by all beneficiaries of the trust, and “(ii) the top bracket threshold shall be equal to the sum of— “(I) $0, plus “(II) the lowest unused 2 percent bracket amount assigned to the trust by all beneficiaries of the trust. “(B) UNUSED 0 PERCENT BRACKET AMOUNT.—For purposes of this paragraph, the term ‘unused 0 percent bracket amount’ means, with respect to any beneficiary for any calendar year, the lesser of— “(i) the excess (if any) of— “(I) the zero bracket threshold, over “(II) the sum of— “(aa) the net value of all taxable assets of the beneficiary for the calendar year, plus “(bb) any unused 0 percent bracket amount assigned by the beneficiary to other nongrantor multibeneficiary trusts, or “(ii) the portion of the net value of all taxable assets of the trust which such beneficiary is eligible to receive. “(C) UNUSED 2 PERCENT BRACKET AMOUNT.—For purposes of this paragraph, the term ‘unused 2 percent bracket amount’ means, with respect to any beneficiary for any calendar year, the lesser of— “(i) the excess (if any) of— “(I) the top bracket threshold reduced by the zero bracket threshold, over “(II) the sum of— “(aa) the net value of all taxable assets of the beneficiary for the calendar year in excess of the zero bracket threshold, plus “(bb) any unused 2 percent bracket amount assigned by the beneficiary to other nongrantor multibeneficiary trusts, or “(ii) the portion of the net value of all taxable assets of the trust which such beneficiary is eligible to receive. “(D) ASSIGNMENT OF AMOUNTS.—The
- In any case in which no affirmative assignment is made by a beneficiary, the amount assigned shall be $0.
- “(b) Exclusion for certain assets.—Property of the taxpayer shall not be taken into account under subsection (a) if such property— “(1) has a value of $50,000 or less (determined without regard to any debt owed by the taxpayer with respect to such property), “(2) is tangible personal property, and “(3) is not property— “(A) which is used in a trade or business of the taxpayer, “(B) in connection with which a deduction is allowable under section 212, or “(C) which is a collectible as defined in section 408(m), a boat, an aircraft, a mobile home, a trailer, a vehicle, or an antique or other asset that maintains or increases its value over time (within the meaning of section 5.02(2) of Revenue Procedure 2018–08). “(c) Rules for determining property of the taxpayer.—For purposes of this subtitle— “(1) PROPERTY INCLUDED IN ESTATE.—Any property that would be included in the estate of the taxpayer if the taxpayer died shall be treated as property of the taxpayer. “(2) INCLUSION OF CERTAIN GIFTS.—Any property transferred by the taxpayer after the date of the enactment of this chapter, to an individual who is a member of the family of the taxpayer (as determined under section 267(c)(4)) and has not attained the age of 18 shall be treated as property of the taxpayer for any calendar year before the year in which such individual attains the age of 18.
- “(B) LIMITATION.—No penalty shall be imposed by reason of subsection (b)(10) unless the portion of the underpayment attributable to substantial wealth tax valuation understatements for the calendar year exceeds $5,000.
2901. Imposition of tax Read Opens in new tab
Summary AI
This section details the imposition of a tax on the net value of an individual's taxable assets at the end of any calendar year, outlining different rates for assets below $50 million, between $50 million and $1 billion, and above $1 billion, with potentially higher rates if specific healthcare legislation is enacted. It also explains how the tax applies to married individuals and nongrantor multibeneficiary trusts, defining key terms and rules for tax computation in these scenarios.
Money References
- (2) ZERO BRACKET THRESHOLD; TOP BRACKET THRESHOLD.—For purposes of this section— (A) ZERO BRACKET THRESHOLD.—The zero bracket threshold is $50,000,000.
- (B) TOP BRACKET THRESHOLD.—The top bracket threshold is $1,000,000,000.
- — (A) IN GENERAL.—In applying this chapter to a nongrantor multibeneficiary trust— (i) the zero bracket threshold shall be equal to the sum of— (I) $0, plus (II) the lowest unused 0 percent bracket amount assigned to the trust by all beneficiaries of the trust, and (ii) the top bracket threshold shall be equal to the sum of— (I) $0, plus (II) the lowest unused 2 percent bracket amount assigned to the trust by all beneficiaries of the trust. (B) UNUSED 0 PERCENT BRACKET AMOUNT.—For purposes of this paragraph, the term “unused 0 percent bracket amount” means, with respect to any beneficiary for any calendar year, the lesser of— (i) the excess (if any) of— (I) the zero bracket threshold, over (II) the sum of— (aa) the net value of all taxable assets of the beneficiary for the calendar year, plus (bb) any unused 0 percent bracket amount assigned by the beneficiary to other nongrantor multibeneficiary trusts, or (ii) the portion of the net value of all taxable assets of the trust which such beneficiary is eligible to receive. (C) UNUSED 2 PERCENT BRACKET AMOUNT.—For purposes of this paragraph, the term “unused 2 percent bracket amount” means, with respect to any beneficiary for any calendar year, the lesser of— (i) the excess (if any) of— (I) the top bracket threshold reduced by the zero bracket threshold, over (II) the sum of— (aa) the net value of all taxable assets of the beneficiary for the calendar year in excess of the zero bracket threshold, plus (bb) any unused 2 percent bracket amount assigned by the beneficiary to other nongrantor multibeneficiary trusts, or (ii) the portion of the net value of all taxable assets of the trust which such beneficiary is eligible to receive.
- In any case in which no affirmative assignment is made by a beneficiary, the amount assigned shall be $0. (3) NONGRANTOR MULTIBENEFICIARY TRUST.—For purposes of this chapter— (A) IN GENERAL.—The term “nongrantor multibeneficiary trust” means any trust or portion of a trust— (i) with respect to which no person is treated as an owner under subpart E of subchapter J of chapter 1, (ii) no property of which is attributable to a gratuitous transfer of assets by a person who is subject to tax under this chapter for the calendar year, and (iii) which has more than one beneficiary (determined as of the last day of the calendar year). (B) EXCEPTION.—Such term shall not include— (i) any trust described in section 401(a) and exempt from tax under section 501(a), (ii) any trust all of the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B), (iii) any charitable lead annuity trust (as defined in section 2642(e)(3)) or charitable lead unitrust, or (iv) any charitable annuity remainder trust (as defined in section 664(d)(1)) or any charitable remainder unitrust (as defined in section 664(d)(2)). (C) BENEFICIARY.—The term “beneficiary” shall not include any person whose interest in a trust is contingent on the death of another person with an interest in such trust. ---
2902. Net value of taxable assets Read Opens in new tab
Summary AI
The text explains how to determine the "net value of all taxable assets," which is the total value of a taxpayer's property minus their debts, while excluding certain types of low-value tangible personal property and specific trust-related assets. It also details rules for considering the property included in a person's estate, gifts to minors, and assets in various types of trusts, as well as guidelines for valuing these assets.
Money References
- (b) Exclusion for certain assets.—Property of the taxpayer shall not be taken into account under subsection (a) if such property— (1) has a value of $50,000 or less (determined without regard to any debt owed by the taxpayer with respect to such property), (2) is tangible personal property, and (3) is not property— (A) which is used in a trade or business of the taxpayer, (B) in connection with which a deduction is allowable under section 212, or (C) which is a collectible as defined in section 408(m), a boat, an aircraft, a mobile home, a trailer, a vehicle, or an antique or other asset that maintains or increases its value over time (within the meaning of section 5.02(2) of Revenue Procedure 2018–08). (c) Rules for determining property of the taxpayer.—For purposes of this subtitle— (1) PROPERTY INCLUDED IN ESTATE.—Any property that would be included in the estate of the taxpayer if the taxpayer died shall be treated as property of the taxpayer.
2903. Special rules Read Opens in new tab
Summary AI
In SEC. 2903, the rules address tax situations for different individuals: those who die during a year are taxed based on their death date; non-residents are taxed only on U.S. property; and covered expatriates are taxed as if the year ended before they left the U.S., with a 40% tax rate on certain income.
2904. Information reporting Read Opens in new tab
Summary AI
The section requires the Secretary to establish regulations within 12 months for reporting the net value of assets to help enforce tax laws. This reporting can be incorporated into existing income reporting, and responsibilities may be placed on financial institutions and businesses, potentially requiring them to estimate their own value.
2905. Enforcement Read Opens in new tab
Summary AI
The Secretary is required to audit at least 30% of taxpayers each year who need to pay a specific tax mentioned in this chapter.
3. Strengthening disclosure requirements Read Opens in new tab
Summary AI
The section outlines that the Secretary of the Treasury can make rules to stop people from using foreign entities to dodge reporting their financial information. It also requires the Treasury to create a plan to use data better to ensure everyone follows these reporting rules.
4. Internal Revenue Service funding Read Opens in new tab
Summary AI
The section outlines funding allocations for the Internal Revenue Service (IRS) for the fiscal years 2024 through 2034, authorizing $70 billion for enforcing tax laws, $10 billion for taxpayer services, and $20 billion for upgrading business systems.
Money References
- “There are authorized to be appropriated to the Secretary for the period of fiscal years 2024 through 2034— “(1) for enforcement of this title, $70,000,000,000, “(2) for taxpayer services, $10,000,000,000, and “(3) for business system modernization, $20,000,000,000.”. (b) Clerical amendment.—The table of sections for subchapter A of chapter 80 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: “Sec. 7813. Authorization of appropriations.”.
7813. Authorization of appropriations Read Opens in new tab
Summary AI
The section authorizes the allocation of funds for specific purposes over the fiscal years 2024 through 2034, including $70 billion for enforcing the title, $10 billion for taxpayer services, and $20 billion for modernizing business systems.
Money References
- There are authorized to be appropriated to the Secretary for the period of fiscal years 2024 through 2034— (1) for enforcement of this title, $70,000,000,000, (2) for taxpayer services, $10,000,000,000, and (3) for business system modernization, $20,000,000,000. ---